HALIFAX - The Nova Scotia Supreme Court has dismissed a bid by a citizens group to overturn a permit for an oil and gas test well near Lake Ainslie, Cape Breton's largest freshwater lake.

In a decision released Wednesday, Judge David MacAdam concludes Environment Minister Sterling Belliveau acted fairly when he rejected an earlier bid by the Margaree Environmental Association to quash the permit granted to PetroWorth Resources Inc.

"There is nothing in the record to suggest the appellant was denied the opportunity to voice its concerns about the proposed well drilling and the potential risks to local residents as well as to the public at large," MacAdam wrote.

"The minister, and his delegate, met their obligation of procedural fairness."

The judge also rejected the group's claim that the proposed well would be too close to Parkins Brook, a stream that feeds Lake Ainslie and the Margaree River, a designated Canadian heritage river.

The group argued that the minister had misinterpreted the definition of a watercourse in the Environment Act, but the judge said Belliveau's interpretation was reasonable and correct.

MacAdam said the brook — described by the government as a drainage ditch — does not meet the legal definition of a watercourse.

"The appellant did not identify any concerns about human health or the environment that were not addressed, either by the terms and conditions in the permit or in the documentation contained in the record," the ruling said.

"Apart from making a number of assertions, the appellant has not shown on the record where the decision of the minister was not reasonable in the circumstances."

The decision said that even though the proposed 1,200-metre well would be drilled within a kilometre of five homes, there are no regulations dealing with proximity to dwellings.

"However, the approval does have terms and conditions for noise, air quality, water quality and erosion control to ensure environmental conditions are maintained within safe limits for human health," MacAdam wrote.

PetroWorth's proposed well would sit about 800 metres from Lake Ainslie and about 180 metres from the nearest watercourse. The Nova Scotia Environment Act says the limit is 100 metres.

Neal Livingston of the Margaree Environmental Association said the decision is disappointing, but does not halt the public opposition to the drilling.

"The court case was just one of the tools in the tool box," said Livingston.

"In no way does this decision ... at all mean that the citizen opposition is going away."

Neal Mednick, president of Toronto-based PetroWorth, said the decision should clear the way for drilling to start in October or November.

"It can be done very safely with no impact on the environment," he said in an interview.

Before PetroWorth's permit expired July 15, the company applied for a one-year extension. However, the province said it wouldn't consider the request until after the court issued its decision.

Mednick said western Cape Breton has already seen its share of oil drilling, with five or six wells drilled in the late 1800s near Lake Ainslie. The company's proposed drill site sits atop a well that produced oil for export to the United States in 1875, he added.

"None of them had any detrimental impact on the environment and none of them were equipped with the kind of modern protective equipment that we will have, such as blowout preventers," he said.

PetroWorth applied for an exploration permit to develop oil and gas in southern Inverness County in September 2010. The province approved the permit almost a year later on July 29, 2011.

By contrast, Mednick said his company received approval for a similar permit in Alberta in only three days.

Livingston said residents have been writing Energy Minister Charlie Parker, asking him not to reissue the permits.

The citizens group first filed an appeal of PetroWorth's permit under the Environment Act in October 2011. Belliveau dismissed it two months later, prompting the group to turn to the court.